Chinese said to carry out onshore field developments in Iran

17 May 2016

Sinopec and China National Petroleum Corporation to work on North Azadegan and Yadavaran

Iran has signed initial contracts with two Chinese groups on the second-phase development of its North Azadegan and Yadaravan onshore oil fields, according to a report by the Iranian Mehr News Agency (MNA).

MNA quoted Iranian Petroleum Minister Bijan Zanganeh saying that Sinopec and China National Petroleum Corporation (CNPC) had signed agreements and that “Iran is ready to hold multilateral negotiations with Chinese companies within its accepted framework”.

The agreements were reached following a meeting with the Chinese Deputy Head of National Energy Administration Zhang Yu Ging.

Sinopec and CNPC had already worked on the early phases of developments at the North Azadegan and Yadaravan fields but the projects faced significant delays.

CNPC was appointed as the developer of phases one and two North Azadegan field in 2009 but was removed in 2014 due to a lack of progress. The phases were each expected to add 75,000 barrels a day (b/d) of crude production capacity.

The Azadegan field, located 80km west of Ahwaz near the Iraqi border, was discovered in 1999 and has since been developed to an estimated production capacity of just 40,000 b/d, according to MEED’s recently-released Opportunity Iran 2016 report.

Iran contracted Chinese group Sinopec to carry out field developments at the Yadaravan field from 2007. The plan was to develop the field’s capacity in two phases, increasing initially to 85,000 b/d and then 185,000 b/d after the second phase.

The Yadaravan development has also encountered major delays. By 2013, only 18 out of a total 49 wells had been drilled at the field and in September of that year production had reached only 25,000 b/d. In 2014, Sinopec said it was targeting 50,000 b/d of production by the end of the year and 85,000 b/d by the end of 2015.

MEED estimates that Iran has over 1 million barrels a day (b/d) of planned capacity in projects either on hold or significantly delayed amid contract difficulties with overseas oil companies, MEED research has found.

The projects – many of which became stalled in the execution phase – could be priorities for completion now nuclear-related sanctions have been lifted against Iran’s energy and banking sectors.

International oil companies (IOCs) are still awaiting the release of the terms for the new Iran Petroleum Contract (IPC), which Iran is planning to attract overseas investment to its oil and gas sector. The launch has been delayed several times and is now anticipated in July.

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